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. Last Updated: 07/27/2016

Putin Knows His Medieval History

Russia's 13 percent income tax had scarcely taken effect when some government officials began to call for a tax hike. They had flushed out the taxpayers with the low flat tax; now they wanted to cash in. And then President Vladimir Putin announced in his state-of-the-nation address that the 13 percent tax rate was here to stay. Put a lid on it.

Will the government put a lid on it?

Our bureaucrats have an amazingly stubborn tendency to view the raising and lowering of taxes exclusively in terms of government revenue. At most they might recall the Laffer Curve, a theory according to which when the aggregate tax burden exceeds a certain level, tax revenues actually begin to decrease. Laffer's theory is clearly a useful tool for understanding taxes in stable market societies. In unstable societies, however, excessive taxation not only decreases revenue, it can destroy the state.

The classic example was recorded by the Byzantine historian Prokopios. When the Emperor Justinian routed the Goths in the sixth century, he liberated Italy and practically restored the Roman Empire within its former borders. But the people of Italy soon discovered that they were now paying taxes 10 times higher than they had in the fledgling Gothic state. They soon sent emissaries to the nearest barbarian tribe, the Germanic Langobards, or Lombards, asking for deliverance from the restored empire and its unbearable taxes.

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In 1640, the Spanish prime minister, Count-Duke Olivares, conceived the idea of imposing a 5 percent property tax on the kingdom of Portugal, which was then part of Spain. The end result was the secession of Portugal.

The fiscal excesses of John Lackland, king of England from 1199-1216, led to revolt and the signing of the Magna Carta. England's attempt to introduce an additional tax on tea sparked the American War of Independence. Budget deficits in eighteenth-century France resulted in the convening of the ?tats G?n?raux and the French Revolution.

These examples are well known. But even when war and revolution were averted, excessive taxation ripped apart the social fabric and the state was transformed. The best example of such a transformation is probably medieval Byzantium.

The tax burden placed on communities drove the peasants to seek the patronage of the landed nobility -- the dynatos -- who delivered the peasantry from fiscal oppression. As more people went over to the dynatos, the tax burden imposed on those who remained increased to compensate. And as the tax burden rose, more and more people abandoned the government in favor of private patrons. The state became exasperated as the poor went over to the dynatos and "deprived themselves the possibility of paying the fair taxes due [to the government]," Justinian wrote. But the people continued to forego freedom in favor of safety. In Europe people became serfs because of the absence of the state; in Byzantium, because of the state's excessive reach.

These are simply examples, of course, not laws. But they are extremely instructive examples. I would say that what is happening with small business in Russia today differs little from what happened to the peasants of Byzantium.

There's no point in comparing Russia to America. And there's no point in creating a tax code that repeats verbatim the advice of Western consultants -- a code in which Western tax rates are combined with the Russian presumption of the taxpayer's guilt. We need to recognize that Russia is essentially a medieval country with a weak social structure, and a low taxation threshold beyond which the state begins to collapse. In the Middle Ages even the desyatina, or 10 percent income tax, was considered an unreasonably high tax rate.

The 13 percent income tax is not a fiscal instrument. To date it is the only real step that has been taken to revive the state. The president's single decisive statement on this score makes up for all the caution displayed elsewhere in his address.

Yulia Latynina is a journalist with ORT.